Washington University Professor Wins Nobel Prize in Economics

Philip H. Dybvig's research explained why banks are subject to runs

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click to enlarge Philip H. Dybvig
Courtesy Washington University
Philip H. Dybvig is the Boatmen's Bancshares Professor of Banking and Finance at Washington University's Olin Business School.

Philip H. Dybvig, an expert in banking and finance at Washington University, won the 2022 Nobel Prize in economic sciences. His win was announced by the Royal Swedish Academy of Sciences today.

This year's prize went to three economists, including Dybvig. One is Ben S. Bernanke, former chair of the Federal Reserve. The other is Douglas Diamond, a professor at the University of Chicago and co-author with Dybvig of the 1983 paper that led to the two winning the prestigious prize.

The paper, "Bank Runs, Deposit Insurance, and Liquidity" explained why banks are subject to runs. The paper's Diamond-Dybvig model reshaped the study of banking, financial crises, liquidity and bank runs.

"Our model showed how to view bank runs as rational behavior," Dybvig said in an article from Washington University. "If you think everyone else is going to take out their money, you're going to take out your money, and that's rational behavior."

According to Dybvig, the model helped economists understand the 2008 financial crisis, which included bank runs. Dybvig became a faculty member at Washington University in 1990 after teaching at Princeton and Yale.

Bernanke also wrote an important paper on bank failures in 1983 that explained how such failures can exacerbate a financial crisis, rather than just be the result of the crisis.

The Nobel Prize in economics was first awarded in 1969, established by Sweden's central bank. The formal name for the prize is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. In addition to the prize itself, Dybvig, Diamond and Bernanke will split a cash award of 10 million Swedish krona (around $900,000).

Dybvig seemed astonished by his win, telling the university, "I seem to be the last to know! I have so many messages on my phone."

About The Author

Rosalind Early

Rosalind is the editor-in-chief of the Riverfront Times. She formerly worked for Washington University's alumni magazine and St. Louis Magazine. In 2018, she was selected as a Rising Leader of Color by the Theatre Communications Group. In 2014, she was selected as an Emerging Leader by FOCUS St. Louis. Her work...
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